| Summary of Significant Accounting Policies | 3. Summary of Significant Accounting Policies
Revenue Recognition and Concentration of Revenues
Revenues are principally earned from long-term contractual agreements to provide online curriculum, books, materials, computers and management services to virtual and blended schools, traditional public schools, school districts, and private schools. In addition to providing the curriculum, books, and materials, under most contracts, the Company provides management services and technology to virtual and blended public schools, including monitoring academic achievement, teacher recommendations and hiring, teacher training, compensation of school personnel, financial management, enrollment processing, and development and procurement of curriculum, equipment, and required services. The schools receive funding on a per student basis from the state in which the public school or school district is located. Shipments of materials for schools that occur in the fourth fiscal quarter and for the upcoming school year are recorded in deferred revenue.
Where the Company has determined that it is the primary obligor for substantially all expenses under these contracts, the Company records the associated per student revenues received by the school from its state funding school district or from other sources up to the expenses incurred in accordance with Accounting Standards Codification (“ASC”) 605, Revenue Recognition (“ASC 605”). As a result of being the primary obligor, amounts recorded as revenues and school operating expenses for the three months ended December 31, 2017 and 2016 were $76.1 million and $74.9 million, respectively, and for the six months ended December 31, 2017 and 2016 were $139.6 million and $137.4 million, respectively. For contracts where the Company is not the primary obligor, the Company records revenues based on its net fees earned under the contractual agreement.
The Company generates revenues under turnkey management contracts with virtual and blended public schools which include multiple elements. These elements typically include:
·
providing each of a school’s students with access to the Company’s online school and lessons;
·
offline learning kits, which include books and materials to supplement the online lessons, where required;
·
the use of a personal computer and associated reclamation services, where required;
·
internet access and technology support services;
·
instruction by a state-certified teacher, where required; and
·
management and technology services necessary to operate a virtual public or blended school. In certain managed school contracts, revenues are determined directly by per enrollment funding.
The Company has determined that the elements of its contracts are valuable to schools in combination, but do not have standalone value. As a result, the elements within the Company’s multiple-element contracts do not qualify as separate units of accounting. Accordingly, the Company accounts for revenues under multiple element arrangements as a single unit of accounting and recognizes the entire arrangement based upon the approximate rate at which it incurs the costs associated with each element. Revenues from certain managed schools are recognized ratably over the period services are performed.
To determine the pro rata amount of revenues to recognize in a fiscal quarter, the Company estimates the total funds each school will receive in a particular school year. Total funds for a school are primarily a function of the number of students enrolled in the school and established per enrollment funding levels, which are generally published on an annual basis by the state or school district. The Company reviews its estimates of funding periodically, and revises as necessary, amortizing any adjustments to earned revenues over the remaining portion of the fiscal year. Actual school funding may vary from these estimates and the impact of these differences could impact the Company’s results of operations. Since the end of the school year coincides with the end of the Company’s fiscal year, annual revenues are generally based on actual school funding and actual costs incurred (including costs for the Company’s services to the schools plus other costs the schools may incur) in the calculation of school operating losses. The Company’s schools’ reported results are subject to annual school district financial audits, which incorporate enrollment counts, funding and other routine financial audit considerations. The results of these audits are incorporated into the Company’s monthly funding estimates for the three and six months ended December 31, 2017 and 2016.
Under the contracts where the Company provides turnkey management services to schools, the Company has generally agreed to absorb any operating losses of the schools in a given school year. These school operating losses represent the excess of costs incurred over revenues earned by the virtual or blended public school as reflected on its respective financial statements, including Company charges to the schools. To the extent a school does not receive funding for each student enrolled in the school, the school would still incur costs associated with serving the unfunded enrollment. If losses due to unfunded enrollments result in a net operating loss for the year that loss is reflected as a reduction in the revenues and net receivables that the Company collects from the school. A school net operating loss in one year does not necessarily mean the Company anticipates losing money on the entire contract with the school. However, a school operating loss may reduce the Company’s ability to collect its management fees in full and recognized revenues are reduced accordingly to reflect the expected cash collections from such schools. The Company amortizes the estimated school operating loss against revenues based upon the percentage of actual revenues in the period to total estimated revenues for the fiscal year.
For turnkey service contract revenues, a school operating loss may reduce the Company’s ability to collect its management fees in full, though as noted it does not necessarily mean that the Company incurs a loss during the period with respect to its services to that school. The Company recognizes revenues, net of its estimated portion of school operating losses, to reflect the expected cash collections from such schools. Revenues are recognized based on the Company’s performance of services under the contract, which it believes is proportionate to its incurrence of costs. The Company incurs costs directly related to the delivery of services. Most of these costs are recognized throughout the year; however, certain costs related to upfront delivery of printed materials, workbooks, laboratory materials and other items are provided at the beginning of the school year and are recognized as expenses when shipped.
Each state or school district has variations in the school funding formulas and methodologies that it uses to estimate funding for revenue recognition at its respective schools. As the Company builds the funding estimates for each school, it is mindful of the state definition for count dates on which reported enrollment numbers will be used for per pupil funding. The parameters the Company considers in estimating funding for revenue recognition purposes include school district count definitions, withdrawal rates, average daily attendance, special needs enrollment, student demographics, academic progress and historical completion, student location, funding caps and other state specified categorical program funding.
Management periodically reviews its estimates of full-year school revenues and operating expenses, and amortizes the net impact of any changes to these estimates over the remainder of the fiscal year. Actual school operating losses may vary from these estimates or revisions, and the impact of these differences could have a material impact on results of operations. Since the end of the school year coincides with the end of the Company’s fiscal year, annual revenues are generally based on actual school funding and actual costs incurred (including costs for the Company’s services to the schools plus other costs the schools may incur) in the calculation of school operating losses. For the three months ended December 31, 2017 and 2016, the Company’s revenues included a reduction for these school operating losses of $13.7 million and $12.6 million, respectively, and $31.5 million and $28.3 million for the six months ended December 31, 2017 and 2016, respectively.
The Company provides certain online curriculum and services to schools and school districts under subscription and perpetual license agreements. Revenues under these agreements are recognized when all of the following conditions are met: there is persuasive evidence of an arrangement; delivery has occurred or services have been rendered; the amount of fees to be paid by the customer is fixed and determinable; and the collectability of the fee is probable. Revenues from the licensing of curriculum under subscription arrangements are recognized on a ratable basis over the subscription period. Revenues from the licensing of curriculum under non-cancelable perpetual arrangements are recognized when all revenue recognition criteria have been met. Revenues from professional consulting, training and support services are deferred and recognized ratably over the service period.
Other revenues are generated from individual customers who prepay and have access for one to two years to company-provided online curriculum. The Company recognizes these revenues pro rata over the maximum term of the customer contract. Revenues from associated offline learning kits are recognized upon shipment.
During the three and six months ended December 31, 2017, the Company had one contract that represented approximately 10% of revenues, while for the three and six months ended December 31, 2016, one contract represented approximately 9% and 10% of revenues, respectively. Approximately 7% of accounts receivable was attributable to one contract as of December 31, 2017.
Consolidation
The condensed consolidated financial statements include the accounts of the Company, its wholly-owned and affiliated companies that the Company owns, directly or indirectly, and all controlled subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation.
Inventories
Inventories consist primarily of textbooks and curriculum materials, a majority of which are supplied to virtual public schools and blended public schools and utilized directly by students. Inventories represent items that are purchased and held for sale and are recorded at the lower of cost (first-in, first-out method) or net realizable value. The provision for excess and obsolete inventory is established based upon the evaluation of the quantity on hand relative to demand. The excess and obsolete inventory reserve was $3.2 million and $2.3 million at December 31, 2017 and June 30, 2017, respectively.
Other Current Assets
Other current assets consist primarily of textbooks, curriculum materials and other supplies which are expected to be returned upon the completion of the school year. Materials not returned are expensed as part of instructional costs and services.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization expense is calculated using the straight-line method over the estimated useful life of the asset (or the lesser of the term of the lease and the estimated useful life of the asset under capital lease). Amortization of assets capitalized under capital lease arrangements is included in depreciation expense. Leasehold improvements are amortized over the lesser of the lease term or the estimated useful life of the asset. The Company determines the lease term in accordance with ASC 840, Leases (“ASC 840”) , as the fixed non-cancelable term of the lease plus all periods for which failure to renew the lease imposes a penalty on the lessee in an amount such that renewal appears, at the inception of the lease, to be reasonably assured.
Property and equipment are depreciated over the following useful lives:
Useful Life
Student and state testing computers
3 - 5 years
Computer hardware
3 years
Computer software
3 - 5 years
Web site development
3 years
Office equipment
5 years
Furniture and fixtures
7 years
Leasehold improvements
3 - 12 years
The Company makes an estimate of unreturned student computers based on an analysis of recent trends of returns. The Company recorded accelerated depreciation of $0.5 million and $0.5 million, for the three months ended December 31, 2017 and 2016, respectively, and $0.9 million and $1.0 million for the six months ended December 31, 2017 and 2016, respectively, related to unreturned student computers. Depreciation expense for property and equipment, including accelerated depreciation for unreturned student computers, for the three months ended December 31, 2017 and 2016 was $4.5 million and $4.2 million, respectively, and $8.9 million and $8.6 million for the six months ended December 31, 2017 and 2016, respectively.
The Company fully expenses computer peripheral equipment (e.g. keyboards, mouses) upon shipment as recovery has been determined to be uneconomical. These expenses totaled $0.4 million and $0.8 million for the three months ended December 31, 2017 and 2016, respectively, and $2.5 million and $2.7 million for the six months ended December 31, 2017 and 2016, respectively, and are recorded as instructional costs and services.
Capitalized Software Costs
The Company develops software for internal use. Software development costs incurred during the application development stage are capitalized in accordance with ASC 350, Intangibles – Goodwill and Other (“ASC 350”) . The Company amortizes these costs over the estimated useful life of the software, which is generally three years. Capitalized software development costs are stated at cost less accumulated amortization.
Capitalized software additions totaled $13.4 million and $13.4 million for the six months ended December 31, 2017 and 2016, respectively. Amortization expense for the three months ended December 31, 2017 and 2016 was $8.4 million and $8.8 million, respectively, and $18.7 million and $16.8 million for the six months ended December 31, 2017 and 2016, respectively.
During the three months ended September 30, 2017, the Company recorded an out of period adjustment related to the capitalization of software and curriculum development. The adjustment increased capitalized software development costs and capitalized curriculum development costs by $2.3 million and $0.6 million, respectively, and decreased net loss by $1.4 million for the period. The Company assessed the materiality of these errors on its prior quarterly and annual financial statements, assessing materiality both quantitatively and qualitatively, in accordance with the SEC’s Staff Accounting Bulletin (“SAB”) No. 99 and SAB No. 108 and concluded that the errors were not material to any of its previously issued financial statements.
Capitalized Curriculum Development Costs
The Company internally develops curriculum, which is primarily provided as online content and accessed via the Internet. The Company also creates textbooks and other materials that are complementary to online content.
The Company capitalizes curriculum development costs incurred during the application development stage in accordance with ASC 350. The Company capitalizes curriculum development costs during the design and deployment phases of the project. As a result, a significant portion of the Company’s courseware development costs qualify for capitalization due to the concentration of its development efforts on the content of the courseware. Capitalization ends when a course is available for general release to its customers, at which time amortization of the capitalized costs begins. The period of time over which these development costs are amortized is generally five years.
Total capitalized curriculum development additions were $4.5 million and $9.1 million for the six months ended December 31, 2017 and 2016, respectively. These amounts are recorded on the accompanying condensed consolidated balance sheets net of amortization charges. Amortization is recorded in instructional costs and services on the accompanying condensed consolidated statements of operations. Amortization expense for the three months ended December 31, 2017 and 2016 was $4.9 million and $5.0 million, respectively, and $10.1 million and $9.6 million for the six months ended December 31, 2017 and 2016, respectively. As mentioned above, capitalized curriculum development additions included an out of period adjustment of $0.6 million.
Income Taxes
The Company accounts for income taxes in accordance with ASC 740, Income Taxes (“ASC 740”) . Under ASC 740, deferred tax assets and liabilities are computed based on the difference between the financial reporting and income tax bases of assets and liabilities using the enacted marginal tax rate. ASC 740 requires that the net deferred tax asset be reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the net deferred tax asset will not be realized.
Redeemable Noncontrolling Interests
Earnings or losses attributable to minority shareholders of a consolidated affiliated company are classified separately as “noncontrolling interest” in the Company’s condensed consolidated statements of operations. Noncontrolling interests in subsidiaries that are redeemable outside of the Company’s control for cash or other assets are classified outside of permanent equity at redeemable value, which approximates fair value. If the redemption amount is other than fair value (e.g. fixed or variable), the redeemable noncontrolling interest is accounted for at the fixed or variable redeemable value. The redeemable noncontrolling interests are adjusted to their redeemable value at each balance sheet date. The resulting increases or decreases in the estimated redemption amount are affected by corresponding charges against retained earnings, or in the absence of retained earnings, additional paid-in capital.
Goodwill and Intangible Assets
The Company records as goodwill the excess of the purchase price over the fair value of the identifiable net assets acquired. Finite-lived intangible assets acquired in business combinations subject to amortization are recorded at their fair value. Finite-lived intangible assets include trade names, acquired customers and non-compete agreements. Such intangible assets are amortized on a straight-line basis over their estimated useful lives. Amortization expense for the three months ended December 31, 2017 and 2016 was $0.8 million and $0.7 million, respectively, and for the six months ended December 31, 2017 and 2016 was $1.5 million and $1.4 million, respectively. Future amortization of intangible assets is $1.5 million, $3.0 million, $2.9 million, $2.4 million and $2.2 million in the fiscal years ending June 30, 2018 through June 30, 2022, respectively, and $7.2 million thereafter. At December 31, 2017 and June 30, 2017, the goodwill balance was $90.2 million and $87.2 million, respectively.
The Company reviews its recorded finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. If the total of the expected undiscounted future cash flows is less than the carrying amount of the asset, a loss is recognized for the difference between fair value and the carrying value of the asset. During the six months ended December 31, 2017 and 2016, there were no events or changes in circumstances that would indicate that the carrying amount of the goodwill was impaired.
ASC 350 prescribes a two-step process for impairment testing of goodwill and intangible assets with indefinite lives, which is performed annually, as well as when an event triggering impairment may have occurred. ASC 350 also allows preparers to qualitatively assess goodwill impairment through a screening process which would permit companies to forgo Step 1 of their annual goodwill impairment process. This qualitative screening process will hereinafter be referred to as “Step 0”. The Company performs its annual assessment on May 31st. Goodwill and intangible assets deemed to have an indefinite life are tested for impairment on an annual basis, or earlier when events or changes in circumstances suggest the carrying amount may not be fully recoverable. During the year ended June 30, 2017, the Company performed “Step 0” of the impairment test and determined that there were no facts and circumstances that indicated that the fair value of the reporting unit may be less than its carrying amount and as a result, the Company determined that no impairment was required. During the six months ended December 31, 2017 and 2016, there were no events or changes in circumstances that would indicate that the carrying amount of the goodwill was impaired.
The following table represents the balance of the Company’s intangible assets as of December 31, 2017 and June 30, 2017:
December 31, 2017
June 30, 2017
($ in millions)
Gross
Accumulated
Net
Gross
Accumulated
Net
Trade names
$
17.6
$
(8.1)
$
9.5
$
17.6
$
(7.6)
$
10.0
Customer and distributor relationships
20.5
(12.7)
7.8
20.1
(12.0)
8.1
Developed technology
3.2
(2.0)
1.2
2.9
(1.7)
1.2
Other
1.4
(0.5)
0.9
1.4
(0.5)
0.9
Total
$
42.7
$
(23.3)
$
19.4
$
42.0
$
(21.8)
$
20.2
Impairment of Long-Lived Assets
Long-lived assets include property, equipment, capitalized curriculum and software developed or obtained for internal use. In accordance with ASC 360, Property, Plant and Equipment (“ASC 360”) , management reviews the Company’s recorded long-lived assets for impairment annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. The Company determines the extent to which an asset may be impaired based upon its expectation of the asset’s future usability as well as on a reasonable assurance that the future cash flows associated with the asset will be in excess of its carrying amount. If the total of the expected undiscounted future cash flows is less than the carrying amount of the asset, a loss is recognized for the difference between fair value and the carrying value of the asset. During the three and six months ended December 31, 2017 and 2016, there was no such impairment charge.
Fair Value Measurements
ASC 820, Fair Value Measurements and Disclosures (“ASC 820”), defines fair value as the price that would be received to sell an asset or paid to transfer a liability, in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants at the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
ASC 820 describes three levels of inputs that may be used to measure fair value:
Level 1: Inputs based on quoted market prices for identical assets or liabilities in active markets at the measurement date.
Level 2: Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3: Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. The inputs are unobservable in the market and significant to the instrument’s valuation.
The carrying values reflected in the accompanying condensed consolidated balance sheets for cash and cash equivalents, receivables, and short and long term debt approximate their fair values.
The held for sale asset is discussed in more detail in Note 11, “Investments.” The lease exit liability is discussed in more detail in Note 10, “Restructuring.” The redeemable noncontrolling interest includes the Company’s joint venture with Middlebury College to form Middlebury Interactive Languages (“MIL”). Under the agreement, Middlebury College had an irrevocable election to sell all of its membership interest to the Company (put right). Middlebury College exercised its put right on May 4, 2015 and a transaction to acquire the remaining 40% noncontrolling interest for $9.1 million in cash was consummated on December 27, 2016.
T he following table summarizes certain fair value information at December 31, 2017 for assets or liabilities measured at fair value on a nonrecurring basis:
Fair Value Measurements Using:
Quoted Prices
in Active
Significant
Markets for
Other
Significant
Identical
Observable
Unobservable
Assets
Input
Inputs
Description
Fair Value
(Level 1)
(Level 2)
(Level 3)
(In thousands)
Held for sale asset
$
1,200
$
—
$
—
$
1,200
Lease exit liability
4,000
—
—
4,000
T he following table summarizes certain fair value information at June 30, 2017 for assets and liabilities measured at fair value on a nonrecurring basis:
Fair Value Measurements Using:
Quoted Prices
in Active
Significant
Markets for
Other
Significant
Identical
Observable
Unobservable
Assets
Input
Inputs
Description
Fair Value
(Level 1)
(Level 2)
(Level 3)
(In thousands)
Held for sale asset
$
1,200
$
—
$
—
$
1,200
Lease exit liability
4,841
—
—
4,841
T he following table summarizes certain fair value information at December 31, 2017 for assets or liabilities measured at fair value on a recurring basis:
Fair Value Measurements Using:
Quoted Prices
in Active
Significant
Markets for
Other
Significant
Identical
Observable
Unobservable
Assets
Input
Inputs
Description
Fair Value
(Level 1)
(Level 2)
(Level 3)
(In thousands)
Contingent consideration associated with acquisitions
$
1,340
$
—
$
—
$
1,340
T he following table summarizes certain fair value information at June 30, 2017 for assets and liabilities measured at fair value on a recurring basis:
Fair Value Measurements Using:
Quoted Prices
in Active
Significant
Markets for
Other
Significant
Identical
Observable
Unobservable
Assets
Input
Inputs
Description
Fair Value
(Level 1)
(Level 2)
(Level 3)
(In thousands)
Contingent consideration associated with acquisitions
$
2,806
$
—
$
—
$
2,806
The following tables summarize the activity during the three and six months ended December 31, 2017 and 2016 for assets and liabilities measured at fair value on a recurring basis:
Three Months Ended December 31, 2017
Purchases,
Fair Value
Issuances,
Unrealized
Fair Value
Description
September 30, 2017
and Settlements
Gains/(Losses)
December 31, 2017
(In thousands)
Contingent consideration associated with acquisitions
$
838
$
500
$
2
$
1,340
Total
$
838
$
500
$
2
$
1,340
Three Months Ended December 31, 2016
Purchases,
Fair Value
Issuances,
Unrealized
Fair Value
Description
September 30, 2016
and Settlements
Gains (Losses)
December 31, 2016
(In thousands)
Redeemable Noncontrolling Interest in Middlebury Interactive Learning
$
9,201
$
(9,134)
$
(67)
$
—
Contingent consideration associated with acquisitions
2,955
—
8
2,963
Total
$
12,156
$
(9,134)
$
(59)
$
2,963
Six Months Ended December 31, 2017
Purchases,
Fair Value
Issuances,
Unrealized
Fair Value
Description
June 30, 2017
and Settlements
Gains (Losses)
December 31, 2017
(In thousands)
Contingent consideration associated with acquisitions
$
2,806
$
(1,319)
$
(147)
$
1,340
Total
$
2,806
$
(1,319)
$
(147)
$
1,340
Six Months Ended December 31, 2016
Purchases,
Fair Value
Issuances,
Unrealized
Fair Value
Description
June 30, 2016
and Settlements
Gains (Losses)
December 31, 2016
(In thousands)
Redeemable Noncontrolling Interest in Middlebury Interactive Learning
$
6,801
$
(9,134)
$
2,333
$
—
Contingent consideration associated with acquisitions
2,947
—
16
2,963
Total
$
9,748
$
(9,134)
$
2,349
$
2,963
Net Income (Loss) Per Common Share
The Company calculates net income (loss) per share in accordance with ASC 260, Earnings Per Share (“ASC 260”). Under ASC 260, basic net income (loss) per common share is calculated by dividing net income (loss) by the weighted-average number of common shares outstanding during the reporting period. The weighted average number of shares of common stock outstanding includes vested restricted stock awards. Diluted net income (loss) per share (“EPS”) reflects the potential dilution that could occur assuming conversion or exercise of all dilutive unexercised stock options. The dilutive effect of stock options and restricted stock awards was determined using the treasury stock method. Under the treasury stock method, the proceeds received from the exercise of stock options and restricted stock awards, the amount of compensation cost for future service not yet recognized by the Company and the amount of tax benefits that would be recorded as income tax expense when the stock options become deductible for income tax purposes are all assumed to be used to repurchase shares of the Company’s common stock. Stock options and restricted stock awards are not included in the computation of diluted net income (loss) per share when they are antidilutive. Common stock outstanding reflected in the Company’s condensed consolidated balance sheets includes restricted stock awards outstanding. Securities that may participate in undistributed net income with common stock are considered participating securities.
Three Months Ended
Six Months Ended
December 31,
December 31,
2017
2016
2017
2016
(In thousands except share and per share data)
Basic net income (loss) per share computation:
Net income (loss) attributable to common stockholders
$
13,259
$
11,652
$
5,203
$
(2,181)
Weighted average common shares — basic
39,347,244
38,104,909
39,227,708
38,021,807
Basic net income (loss) per share
$
0.34
$
0.31
$
0.13
$
(0.06)
Diluted net income (loss) per share computation:
Net income (loss) attributable to common stockholders
$
13,259
$
11,652
$
5,203
$
(2,181)
Share computation:
Weighted average common shares — basic
39,347,244
38,104,909
39,227,708
38,021,807
Effect of dilutive stock options and restricted stock awards
1,338,423
902,367
1,545,309
—
Weighted average common shares — diluted
40,685,667
39,007,276
40,773,017
38,021,807
Diluted net income (loss) per share
$
0.33
$
0.30
$
0.13
$
(0.06)
For the three months ended December 31, 2017 and 2016 and six months ended December 31, 2017, shares issuable in connection with stock options and restricted stock of 1,433,694, 2,039,395, and 1,145,471, respectively, were excluded from the diluted income per share calculation because the effect would have been antidilutive. For the six months ended December 31, 2016, 2,996,186 shares issuable in connection with stock options and restricted stock were excluded from the diluted income per share calculation because the effect would have been antidilutive due to the Company’s net loss during the six months ended December 31, 2016. As of December 31, 2017, the Company had 44,898,430 shares issued and 41,395,832 shares outstanding.
Reclassification
Certain previous year amounts have been reclassified to conform with current year presentations, as related to the statement of cash flows.
Recent Accounting Pronouncements
Accounting Standards Adopted
In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-09, Compensation - Stock Compensation (Topic 718) (“ASU 2016‑09”) . This update was issued as part of the FASB’s simplification initiative and affects all entities that issue share-based payment awards to their employees. The amendments in this update cover such areas as the recognition of excess tax benefits and deficiencies and an accounting policy election for forfeitures. As part of the new guidance:
·
Excess tax benefits or deficiencies arising from share-based awards will be reflected in the condensed consolidated statements of operations as income tax expense rather than within stockholders’ equity. The adoption of this guidance may result in volatility within a company’s results of operations, primarily due to changes in the stock price.
·
Excess tax benefits will be presented as an operating activity on the statement of cash flows rather than as a financing activity.
·
A forfeiture election will be made to either estimate forfeitures (sim |
